Rise in construction costs in Krasnodar by 5% over the past six months
In the heart of Russia's southern region, Krasnodar, the real estate market is showing a fascinating contrast. While the overall housing market continues to struggle, the luxury segment is steadily growing, according to Tamara Kolomiitseva, the commercial director of a federal developer.
The first half of 2025 has seen a 5% increase in the average cost per square meter in Krasnodar’s luxury new buildings, compared to more affordable segments. This rise can be attributed to several factors, including tighter supply in luxury housing, relatively resilient luxury demand, financing constraints that selectively impact affordable segments, and rising construction costs.
Following a sharp drop in new home sales in Krasnodar, especially a 46% plunge in the region in early 2025 due to the end of mortgage subsidies and high borrowing costs, the housing market tightened. This decreased supply typically pressures prices upward, especially in high-demand luxury segments.
The closure of Russia’s flagship mortgage subsidy in July 2024 and high interest rates (despite some cuts, with the central bank rate still around 18% as of July 2025) have restricted buyer access to financing. This led to a 26% overall decline in new residential sales in Russia, but luxury buyers may be less sensitive to credit conditions, allowing sellers to maintain or raise prices in the luxury market while affordable segments suffer price stagnation or declines.
The Russian ruble weakening and inflation targeting by the central bank suggest cost pressures on materials and labor, increasing construction costs. Luxury developments, often involving higher-end materials and finishes, would be more affected, raising the cost per square meter relative to cheaper segments.
However, the demand for luxury tourism and leisure projects remains strong, with new developments such as Dusit Thani & SPA Anapa Miracleon on the Black Sea coast signalling sustained or increasing demand in the luxury real estate market in Krasnodar Krai, supporting price growth in the luxury segment.
The current growth in Krasnodar's real estate market compensates for the 2024 decline, with the average cost per square meter in new buildings in Krasnodar for the first half of 2025 standing at 164,1 thousand rubles. The business segment demonstrated the highest growth, with prices increasing by 15% to 220,6 thousand rubles per square meter in the first half of 2025, while the housing price in the comfort class increased by 5% to 162,9 thousand rubles per square meter.
In contrast, the typical segment, which was oversupplied in 2024, has seen a decrease in cost per square meter. The cost per square meter in the typical segment decreased by 8% in the first half of 2025, reaching 138,4 thousand rubles, and decreased by 20% over the entire previous year.
These mixed dynamics in the Krasnodar new building market are a topic of discussion in local business circles, as reported by the "Business Gazette. South." As the market recovers gradually from the decline in the previous year, it will be interesting to see how these trends continue to unfold.
Investors in the real-estate market of Krasnodar might find it strategic to focus on luxury segments, as the average cost per square meter in these high-end properties increased by 5% in the first half of 2025, contrary to the decline seen in more affordable segments. This growth can be attributable to factors such as tighter supply, resilient luxury demand, financing constraints, rising construction costs, and sustained demand for luxury tourism and leisure projects.
The finance industry couldPLAY a crucial role in the ongoing growth of Krasnodar's real-estate market, as increasingly stringent credit conditions have led to a disproportionate impact on affordable segments, leaving luxury buyers relatively unaffected. This trend may persist, as luxury buyers are thought to be less sensitive to credit conditions compared to those in the affordable market segment.
